Railbelt utility leaders want the Alaska Energy Authority to approve a $46.4 million expansion of the Bradley Lake hydroelectric plant.
AEA management is on board with the proposal, but during the June 29 AEA board meeting, members questioned both as to why they should approve the project when transmission line constraints already prevent what is the lowest cost power source in the region from being used to its full potential.
The Battle Creek diversion project would add about 37,300 megawatt hours per year to Bradley Lake’s current power production, which is nearly 10 percent of its average annual output. That would supply enough additional hydropower to meet the needs of about 5,200 households in the region, according to AEA Owned Assets Manager Bryan Carey.
Specifically, the Battle Creek project consists of constructing a 16-foot high, 60-foot wide concrete dam to divert water into a five-foot diameter, high-density polyethylene pipe. The pipe — using natural elevation changes — would carry the water 1.7 miles to the Bradley Lake facilities.
A 2.9-mile gravel road would be built to access the dam and most of the road would be built directly on top of the buried water pipe to make the most use out of the pipeline corridor.
The water from Battle Creek would be stored in Bradley Lake, thus providing additional water to be run through the existing powerhouse, Carey said.
AEA estimates the final cost of wholesale power from the Battle Creek diversion would be 7.35 cents per kilowatt-hour if it can be debt-financed over 30 years at 4 percent interest.
AEA owns Bradley Lake, which is about 30 miles east of Homer at the head of Kachemak Bay, and would also own the Battle Creek project, thus the project needs to be approved by the authority’s board.
The Railbelt electric utilities each purchase a prescribed share of power from Bradley Lake to cover its costs and would do the same for the portion of power attributable to Battle Creek.
Chugach Electric Association CEO Lee Thibert said to the AEA board that the Battle Creek power would initially be slightly more expensive than some other generation options but over the life of the project it would provide rate stability that would be a benefit to Railbelt ratepayers.
“(Battle Creek) is in our best interest for long-term energy needs,” Thibert said.
Currently, there simply isn’t enough water behind the 125-foot high Bradley Lake dam to run the two 60-megawatt generators full-bore full-time, he explained.
According to Thibert, the utilities want to get the project, which has gone through environmental reviews, out to bid this year.
Aquatic monitoring found no fish within several miles of the proposed dam site, according to the authority, and it believes salmon habitat near tidewater could be improved because the dam would remove glacial water and moderate summer stream flow.
The run-of-river Battle Creek diversion would be shut down in the winter when there is no water flow from Battle Glacier, Carey noted.
AEA Executive Director Michael Lamb said federal interest rate hikes are the driving force for wanting to move quickly.
“There is a sense of urgency because the cost of money is going up. That changes the dynamics of what the cost of (Battle Creek) is in the long run,” Lamb said.
The board did not take any action on the Battle Creek proposal at its latest meeting, but a resolution to approve it will likely be put before the board soon, according to AEA officials.
Bradley Lake has largely been a success story. As it stands, Bradley Lake supplies 9 percent of the Railbelt’s electric supply and is the lowest cost power in the region at about 4 cents per kilowatt-hour, according to AEA.
The 120-megawatt hydro project, which was finished in 1991, has a cumulative cost of $328 million when post-construction capital improvements are added in.
Carey said AEA estimates Bradley Lake’s replacement costs to be in the $500 million range.
While expanding what has worked well would seem to be a sure-fire win, AEA board members expressed a little skepticism about the necessity of the Battle Creek project given authority management recently finalized a study that contends the Kenai Peninsula electric transmission system needs more than $400 million in upgrades to run at peak efficiency.
Currently, there is just one 75-megawatt capacity transmission line connecting Bradley Lake to the Railbelt grid, meaning the 120-megawatt hydro project already can’t be utilized to full capacity.
AEA board Vice Chair Dana Pruhs, owner of Anchorage-based Pruhs Construction, likened Battle Creek to building a four-lane bridge on a two-lane highway.
However, the utility leaders said the benefits of the Battle Creek project could still be realized, even if the transmission situation is less than ideal, because of the options hydropower affords.
Unlike most other forms of renewable energy, traditional hydropower such as Bradley Lake allows managers to schedule power production because the power is essentially stored in the water behind the dam. It is not dependent upon uncontrollable forces such as wind or sunlight; adding Battle Creek water would allow the Bradley Lake generators to be run at the maximum transmission capacity longer and displace some of the higher cost natural gas-fired generation the Railbelt relies on heavily, Chugach Vice President Paul Risse explained.
“If that (transmission) constraint were lifted it would be of greater value,” Risse said, but operating under the constraint still allows the utilities to use all the power, just not to its maximum economic benefit.
AEA’s Railbelt Transmission Study estimates that $885 million of investment in major electric upgrades from Homer to Fairbanks — including multiple segments of wholly new lines — could save the region’s ratepayers up to $80 million collectively by the time the work is done in 2030.
The utilities don’t dismiss the fact that the upgrades would provide for a more efficient, reliable transmission system as a whole, but stress the economics simply don’t work out for entities that must answer to their own ratepayers first.
Matanuska Electric Association holds rights to a 14 percent share of Bradley Lake power, which is about 10 megawatts, MEA General Manager Tony Izzo said. At the same time, the utility has a 171-megawatt high efficiency gas-fired plant that can reliably supply many times more power to his ratepayers without hundreds of millions of dollars in transmission investments.
Battle Creek is an opportunity to diversify the utilities’ fuel supply and add to what is a long-term, low-cost power option, while the transmission infrastructure is a different debate entirely, Izzo said.
“We prioritize things all the time,” he said. “In today’s economics with declining kilowatt hours (of demand) we’re focused on trying to find the lowest cost energy, not build a system that is as redundant as the Lower 48 without the ratepayer base to possibly afford it.”
Chugach’s Thibert said that today’s economics, particularly with oil prices making diesel-fired generation competitive with natural gas in Fairbanks, don’t allow the transmission intertie improvements to pay for themselves.
Brad Janorschke, general manager of Homer Electric, which serves most of the Kenai Peninsula, reiterated the sentiments of Izzo and Thibert. He said he would like to see some of the transmission improvements made, but a lack of load growth — from residents using power more efficiently and stalling economic growth — challenges those projects.
“When it boils down to economics adding a more robust transmission system on the Kenai Peninsula, for my members, does not give me an opportunity to secure more less expensive power than what I already have today,” Janorschke said. “So for me the numbers don’t pencil out.”
AEA board member and state Commerce Department Deputy Commissioner Fred Parady said the disagreement between AEA and the utilities over what needs to happen to the electric transmission system is a fundamental issue that needs to be settled.
“Something’s missing here. The gap between the utilities and AEA over how the list (of transmission projects) gets prioritized or what we do have in common, that we agree with, that should be tackled. It’s just got to be resolved,” Parady said. “This is an engineering question, an economics question; the gap in perception of that is dysfunctional for all of us.”
Elwood Brehmer can be reached at [email protected]